UPDATE: Today News Corporation, Providence Equity Partners, The Walt Disney Company, and the Hulu senior management team issued a joint statement that it was terminating the sale of Hulu. ”We look forward to working together to continue mapping out its path to even greater success.” (Full statement below.) So what went wrong? A lot of things. But people close to the process tell me that one problem was particularly difficult to overcome: Comcast, Disney, and News Corp could never agree on the scope of the programming they were willing to offer someone buying Hulu. This was especially true for advertising supported VOD, the kind of service that Hulu offers now. Hulu simply wasn’t worth much if the sellers wouldn’t throw in exclusive rights to stream popular first-run shows. Sources tell me that Disney was more open to offering hit programming, and therefore to a Hulu sale, than News Corp was — even though News Corp’s digital chief Jon Miller was the point person in wrangling the bids. (Comcast had to give up its vote at Hulu to win federal approval for its acquisition of NBCUniversal.)

As far as the actual bidding, Dish Network was willing to bargain but offered less than the $2B that the sellers wanted. Google was willing to pay a lot more, only if it included lots of exclusive programming guarantees. But the thing to remember is that all three of Hulu’s main backers collect a lot of cash from cable channels — and therefore have a lot at stake in the ability of cable and satellite companies to roll out ‘TV Everywhere’ services. The concept is that pay TV providers will offer you the ability to watch first-run shows on demand on smartphones and tablets without extra cost, as long as you’re a subscriber. If Hulu has compelling ad-supported content available for free, then consumers would have an incentive to cut the cable TV cord. Programmers don’t have to think hard about that choice. Even though Hulu is an established service and TV Everywhere is just getting started, cable and satellite companies collectively have a lot more customers than Hulu probably ever will.

PREVIOUS 4:40 PM: Here’s the official announcement:

Los Angeles, New York & Providence, RI – October 13, 2011 – The following is a joint statement from Hulu owners News Corporation, Providence Equity Partners, The Walt Disney Company and the Hulu senior management team:

“Since Hulu holds a unique and compelling strategic value to each of its owners, we have terminated the sale process and look forward to working together to continue mapping out its path to even greater success. Our focus now rests solely on ensuring that our efforts as owners contribute in a meaningful way to the exciting future that lies ahead for Hulu.”